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Germany Ifo rose to 88.6, entering holiday with a sense of hope

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    ActionForex.com
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    Germany Ifo Business Climate rose from 86.4 to 88.6 in December, above expectation of 87.2. Current Situation Index rose from 93.2 to 94.4, above expectation of 93.5. Expectations Index rose from 80.2 to 83.2, above expectation of 82.0.

    By sector, manufacturing rose from -11.5 to -5.6. Services rose from -5.3 to -1.2. Trade rose from -26.9 to -20.0. Construction, however, dropped from -21.5 to -22.2.

    Ifo said: “Sentiment in the German economy has brightened considerably. The ifo Business Climate Index rose to 88.6 points in December, up from 86.4 points (seasonally adjusted) in November. Companies assessed their current situation as better again. This comes on the heels of six consecutive falls in the indicator for the current situation. Expectations also improved noticeably. German business is entering the holiday season with a sense of hope.”

    Full release here.

    NZ BNZ performance of services dropped to 53.7

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      ActionForex.com
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      New Zealand BusinessNZ Performance of Services Index declined from 57.1 to 53.7 in November, still above long-term average of 53.6. Looking at some details, activity/sales dropped from 61.0 to 58.1. Employment tumbled from 57.1 to 51.8. New orders/business declined from 59.6 to 57.3. Stocks/inventories fell from 56.1 to 55.0. Supplier deliveries fell from 52.0 to 47.3.

      BusinessNZ chief executive Kirk Hope said: “With its sister survey the PMI again showing contraction in November and economic headwinds approaching, the easing of expansion in activity is not unexpected. Also, with the Global PSI result of 48.1 at a 29-month low, it will be a tall order for the New Zealand services sector to continue the overall trends experienced during the second half of 2022”.

      BNZ Senior Economist Craig Ebert said that “November’s PSI proved, for the third month running, to be an important counterpoint to the weakening PMI. It looks as though the services industries – just like they did in Q3 – will more than make up for any weakness in manufacturing in Q4, such that GDP for that quarter manages an expansion”.

      Full release here.

      Eurozone CPI finalized at 10.1% yoy in Nov, core CPI at 5.0% yoy

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        ActionForex.com
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        Eurozone CPI was finalized at 10.1% yoy in November, down from October’s 10.6% yoy. CPI core was finalized at 5.0%, unchanged from prior month’s reading. The highest contribution came from energy (+3.82%), followed by food, alcohol & tobacco (+2.84%), services (+1.76%) and non-energy industrial goods (+1.63%).

        EU CPI was finalized at 11.1% mom, down from October’s 11.5% yoy. The lowest annual rates were registered in Spain (6.7%), France (7.1%) and Malta (7.2%). The highest annual rates were recorded in Hungary (23.1%), Latvia (21.7%), Estonia and Lithuania (both 21.4%). Compared with October, annual inflation fell in sixteen Member States, remained stable in three and rose in eight.

        Full release here.

        ECB Rehn: More 50bps hike at least as far as I see in Feb and Mar

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          ActionForex.com
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          ECB Governing Council member Olli Rehn said, “we will stay the course as President (Christine) Lagarde yesterday indicated and this will likely mean 50 basis point rate hikes in the coming meetings, at least as far as I see in February, and March.”

          Another Governing Council member Robert Holzmann said the signal that more 50bps rate hikes are coming was “a toughly hawkish statement that for me is equivalent to the 75”. He added that ECB could “go deep into restrictive territory if needed”.

          ECB Villeroy: The match is over in fighting inflation

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            ActionForex.com
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            ECB Governing Council member Francois Villeroy de Galhau told BFM Business radio that “the match is not over” in fighting inflation, adding that rate hikes remain the main tool.

            Regarding the quantitative tightening on the APP by EUR 15B per month from March, he said, “we will re-examine it in June and we will probably increase the reduction starting in July,”

            “The European economy is more resilient than we feared even a few weeks ago,” he said. “There will be a strong slowdown in 2023. We will escape what certain people call a hard landing. We will have a rather significant rebound in 2024 and 2025.”

            UK PMI manufacturing fell to 44.7, services recovery to 50.0

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              ActionForex.com
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              UK PMI Manufacturing dropped from 46.5 to 44.7 in December, a 31-month low. PMI Services rose from 48.8 to 50.0. PMI Composite rose from 48.2 to 49.0.

              Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said: “The December data add to the likelihood that the UK is in recession, with the PMI indicating a 0.3% GDP contraction in the fourth quarter after the 0.2% decline seen in the three months to September.

              “For now, the downturn looks to be relatively mild, and the easing in the rate of decline in December is encouraging news, as is the further marked cooling of inflationary pressures. However, the fact that the downturn has moderated compared to the turmoil created in the immediate aftermath of the botched “mini budget”, most notably in financial services, is no real cause for cheer. It is especially worrying to see business confidence and order book indicators remain so low by historical standards, with both of these key gauges signalling heightened degrees of economic stress.

              “Hence it’s no surprise to see that businesses are battening down the hatches, most notably by reducing headcounts, in a sign that the downturn not only has further to run but could yet accelerate again, especially given December’s further hike to interest rates.”

              Full release here.

              Eurozone PMI composite rose to 48.8, consistent with -0.2% GDP contraction in Q4

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                ActionForex.com
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                Eurozone PMI Manufacturing rose from 47.1 to 47.8 in December. PMI Services rose from 48.5 to 49.1. PMI Composite rose from 47.8 to 48.8. Still, the downside extended into its sixth successive month, even though rate of decline moderated.

                Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said: “While the further fall in business activity in December signals a strong possibility of recession, the survey also hints that any downturn will be milder than thought likely a few months ago. The data for the fourth quarter are consistent with GDP contracting at a quarterly rate of just less than 0.2%, and forward-looking indicators are currently boding well for the rate of decline to ease further in the first quarter.”

                Full release here.

                Bundesbank expects no severe economic slump in Germany

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                  ActionForex.com
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                  Bundesbank projects that the German economy will contract -0.5% in 2023, then grow by 1.7% in 2024 and 1.4% in 2025. President Joachim Nagel said, “Economic output is likely to shrink initially, but we expect a gradual recovery from the second half of 2023…  Compared to the June projection, the rate of change of GDP for 2023 has been revised significantly downwards.”

                  HICP inflation is projected to decline to 7.2% in 2023, then to 4.1% in 2024, and 2.8% in 2025. HICP excluding energy and food is expected to increase slightly to 4.3% in 2023, then gradually decline to 2.9% in 2024 and 2.6% in 2025. .

                  Full release here.

                  UK retail sales volumes down -0.4% mom in Nov, values up 0.5% mom

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                    ActionForex.com
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                    In November, UK retail sales volumes declined -0.4% mom, much worse than expectation of 0.3% mom rise. Ex-fuel sales dropped -0.3% mom, worse than expectation of 0.3% mom. Fuel sales volumes declined -1.7% mom.

                    In value term, retail sales rose 0.5% mom while ex-fuel sales rose 0.1% mom.

                    Full release here.

                    Japan PMI manufacturing fell to 48.8, but services improved to 51.7

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                      ActionForex.com
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                      Japan PMI Manufacturing fell slightly from 49.0 to 48.8 in December, above expectation of 48.0. That’s the worst contractionary reading since October 2020. PMI Services, however, improved from 50.3 to 51.7. PMI Composite also rose back from 48.9 to 50.0.

                      Laura Denman, Economist at S&P Global Market Intelligence, said:

                      “The Japanese private sector economy saw a stabilisation in business activity in the final month of the year, with flash data indicating that the divergence between the manufacturing and services sectors has grown further. As has been the case since the launching of the National Travel Discount Programme in October, service providers have reportedly continued to profit from a boost in tourism volumes. Notably, firms have seemingly gained some pricing power as a result of improving demand within the sector and raised their selling prices at the sharpest rate since October 2019.

                      “Conversely, manufacturing firms continued to struggle in the face of subdued demand conditions and severe inflationary pressures with the latest flash PMI reading the lowest since October 2020. December data saw production and order books at Japanese manufacturers contract further, but at paces that were slower than in November. At the same time, though historically sharp, inflationary pressures cooled with the rate of input price inflation at the lowest level since September 2021.”

                      Full release here.

                      Australia PMI composite dropped to 47.3, first signs of desired soft landing

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                        ActionForex.com
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                        Australia PMI Manufacturing dropped from 51.3 to 50.4 in December, a 31-month low. PMI Services dropped from 47.6 to 46.9, an 11-month low. PMI Composite dropped from 48.0 to 47.3, also an 11-month low.

                        Warren Hogan, Chief Economic Advisor at Judo Bank said:

                        “The December results are one of the most up to date readings on the Australian economy and show that higher interest rates are starting to have the desired impact on activity. The Flash PMI readings for December are still well above levels that would normally be associated with recession. What we are seeing could be the first signs of a desired soft landing for the Australian economy in 2023…

                        “The slowing in this leading indicator of Australian economic activity will be welcomed by the RBA. Tighter monetary policy is having the desired effect, that is, a gradual slowing in domestic demand that should eventually filter through to lower inflation…

                        “This important leading indicator of Australian economic activity raises the prospect of an extended pause in the rate hiking cycle. As the rate hikes of 2022 continue to work through the economy over the first half of 2023, the RBA appears to have some scope to sit back and watch for a while.”

                        Full release here.

                        NZ BusinessNZ manufacturing dropped to 47.4, negative dynamic at play

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                          ActionForex.com
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                          New Zealand BusinessNZ Performance of Manufacturing Index dropped from 49.3 to 47.4 in November. That is the first time the PMI has shown consecutive months of contraction since the first nationwide lockdown in 2020.

                          Looking at some details, production fell slightly from 49.9 to 49.6. Employment fell from 48.7 to 46.7. New orders dropped further from 44.4 to 41.8. Finished stocks rose from 55.0 to 56.1. Deliveries dropped from 55.4 to 50.7.

                          BNZ Senior Economist, Craig Ebert stated “it’s been quite the sag in the PMI, compared to just three months ago when everything appeared positive. Of course, the PMI can dive down to the 40-zone when things get recessionary. And November’s result wasn’t that awful. That said, it also had componentry showing a negative dynamic at play”.

                          Full release here.

                          ECB Lagarde expects more steady 50bps hikes, EUR/CAD accelerates up

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                            ActionForex.com
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                            Euro is given a further boost after ECB President Christine Lagarde said in the the post-meeting press conference that “interest rates will still have to rise significantly and at a steady pace.” She added, “Obvious that we should expect 50 bps hikes for period of time.” The clarity of Lagarde’s message was a rather big surprise to the markets.

                            EUR/CAD’s rally accelerates to as high as 1.4591 and it’s on track to 161.8% projection of 1.2867 to 1.3694 from 1.3270 at 1.4608. Firm break there will put focus to key long term fibonacci level of 1.6151 to 1.2867 at 1.4897.

                            ECB press conference live stream

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                              US retail sales down -0.6% mom in Nov, ex-auto sales down -0.2% mom

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                                ActionForex.com
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                                US retail sales dropped -0.6% mom to USD 689.4B in November, worse than expectation of -0.1% mom. Ex-auto sales dropped -0.2% mom to USD 562.9B, worse than expectation of 0.2% mom rise. Ex-gasoline sales dropped -0.6% mom to USD 625.1B. Ex-auto, ex-gasoline sales dropped -0.2% to USD 498.6B. Total sales for September through November were up 7.7% yoy from the same period a year ago.

                                Full retail sales release here.

                                Initial jobless claims dropped -20k to 211k in the week ending December 10, smaller than expectation of 230k. Four-week moving average of initial claims dropped -3k to 227k. Continuing claims rose 1k to 1671k in the week ending December 3. Four-week moving average of continuing claims rose 43k to 1625k.

                                Full jobless claims released here.

                                ECB hikes 50bps, expects to raise rates further

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                                  ActionForex.com
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                                  ECB raises the three key interest rates by 50bps today as expected. The main refinancing, marginal lending, and deposit rates are 2.50%, 2.75% and 2.00% respectively. The Governing Council expects to “raise them further” based on “substantial upward revision to the inflation outlook”.

                                  Also ECB noted that “keeping interest rates at restrictive levels will over time reduce inflation by dampening demand and will also guard against the risk of a persistent upward shift in inflation expectations.” Future policy decisions will continue to be “data-dependent”, following a “meeting-by-meeting approach”.

                                  Reinvestment under the APP purchases will continue until the end of February 2023. The portfolio will then decline at a “measured and predictable pace” subsequently, amount to EUR 15B per month on average until Q2 2023. Reinvestment under PEPP will continue at least until the end of 2024.

                                  Based on new economic projections, inflation is expected to reach 8.4% in 2022, then fall to 6.3% in 2023, and then 3.4% in 2024, and 2.3% in 2025. Core inflation, excluding energy and food, is projected to be at 3.9% in 2022, 4.2% in 2023, 2.8% in 2024, and then 2.4% in 2025. The economy is projected to grow 3.4% in 2022, 0.5% in 2023, 1.9% in 2024, and then 1.8% in 2025.

                                  Full statement here.

                                  BoE hikes 50bps, majority expects further increases

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                                    ActionForex.com
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                                    BoE raises Bank Rate by 50bps to 3.50% as expected, by 6-3 vote. Two members, Swati Dhingra and Silvana Tenreyro voted for no change. On the other hand, Catherine Mann voted for 75bps hike.

                                    The “majority” of the MPC judged that “should the economy evolve broadly in line with the November Monetary Policy Report projections, further increases in Bank Rate may be required”.

                                    It’s also reiterated that “The Committee continues to judge that, if the outlook suggests more persistent inflationary pressures, it will respond forcefully, as necessary.”

                                    Full statement here.

                                    SNB Jordan: We will continue to sell foreign currency if appropriate

                                      By
                                      ActionForex.com
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                                      In the post meeting press conference, SNB Chairman Thomas Jordan said that this year’s 4% appreciation in Swiss Franc exchange rate “has helped ensure that less inflation has been imported from abroad, thus curbing the rise in inflation.”

                                      He said that the central bank sold “foreign currency in recent months” to ensure appropriate monetary conditions. He added, “We will also sell foreign currency in the future if this is appropriate from the monetary policy perspective. Conversely, we remain willing to buy foreign currency again if necessary, i.e. if there were to be excessive appreciation pressure.”

                                      Full remarks here.

                                      SNB hikes 50bps to 100%, cannot rule out more

                                        By
                                        ActionForex.com
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                                        SNB raises the policy rate by 50bps to 1.00% as widely expected, to “countering increased inflation pressure and a further spread of inflation”. The central added that additional rate hikes “cannot be ruled out”. It also maintained the willingness to be “active in the foreign exchange markets as necessary”.

                                        In the new conditional inflation forecast based on 1.0% policy rate, inflation forecasts was lowered from 3.0% to 2.9% in 2022, left unchanged at 2.4% in 2023, and raised from 1.7% to 1.8% in 2024. Inflation forecast was indeed raised from Q3 2023 through Q4 2024.

                                        The higher inflation forecasts was “attributable to stronger inflationary pressure from abroad and the fact that price increases are spreading across the various categories of goods and services in the consumer price index.”

                                        Regarding GDP growth, SNB expects its to be at around 2.0% this year. But weaker overseas demand and higher energy prices are likely to “curb economic activity marked in the coming year”. SNB expects GDP growth to slow to 0.5% in 2023.

                                         

                                        Full statement here.

                                        Previews on SNB, BoE and ECB

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                                          ActionForex.com
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                                          SNB, BoE and ECB rate decisions are the focuses of the day and all are expected to deliver 50bps rate hikes.

                                          There are some talks that given SNB only meets every quarter, it may surprise the market by maintaining the pace of 75bps. But the balance is more towards a 50bps hike to 1.00%. Tightening bias should be maintained while some focuses will be on the rhetoric on Swiss Franc exchange rate.

                                          BoE is expected to raise policy rate by 50bps to 3.50%. Some attention will be on the voting. Last month, only seven MPC members voted for the 75bps hike. Swati Dhingra voted for 50bps, while Silvana Tenreyro voted for 25bps.

                                          ECB should raise the main refinancing rate by 50bps to 2.50%. Additionally, it would announce some key principles regarding quantitative tightening, but the details main only come later, probably at February’s meeting. The new economic projections would also be watched closely on the central banks view on the path of slowing inflation and recession.

                                          Here are some previews for SNB, BoE and ECB:

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